The Trump administration is building an AI-powered system dubbed a "detective border" to identify and intercept goods routed through third countries in an effort to help Chinese manufacturers circumvent US tariffs.

In a report released Thursday, the White House Office of Trade and Manufacturing Policy alleged that dozens of nations form part of China's "shadow transshipment network," categorizing them based on "the scale of China-linked trade, the depth of their economic integration with China, and the weak-link advantages that make them susceptible to rerouting activity."

According to the report, authored by the office of White House trade adviser Peter Navarro, more than 40 countries present elevated illegal transshipment risk. It identifies "China's biggest enablers" as ranging "from Mexico and Canada on US land borders to the European Union, India, Japan, and South Korea." Other nations named include Indonesia, Thailand, Brazil, and Malaysia, with some cited for exploitable advantages such as low labor costs, strategic port access, lax customs enforcement, or free trade zones.

The estimated values of goods flowing through third countries to evade duties and other trade remedies draw on analysis from two government and three private-sector sources. AI supply chain firm Exiger offered a mid-range estimate of $75 billion in illegally transshipped goods between February 2025 and February 2026, translating to a loss of tariff revenue between $19 billion and $34 billion.

"This is basically a warning to the world — don't try to cheat America," Navarro said in a Thursday interview with Bloomberg Television.

Beyond China's continued access to the US market contrary to American trade policy, the report emphasized that transshipping nations themselves profit substantially. "Local firms capture assembly fees, warehousing revenue, logistics margins, port charges, customs brokerage income, land rents, and export-processing-zone investment," the report stated. "Governments benefit from jobs, tax receipts, foreign investment, and trade growth."

Historical Context and Tariff Pressure

The dynamics are not entirely new. During President Donald Trump's first term, sweeping tariffs on Chinese exports prompted many companies to diversify supply chains by relocating some production outside China. This "China +1" strategy triggered significant investment in countries such as Vietnam and Cambodia, frequently by Chinese-owned factories.

Since returning to office, Trump has imposed a series of country-specific duties, with some of the steepest rates directed at close allies and major trading partners. The resulting tariffs — totaling tens of billions of dollars — have placed considerable strain on compliant importers.

The "Detective Border" Initiative

The White House report acknowledges that "tariff differentials" between countries can intensify the incentive to illegally transship goods. In response, it outlines new enforcement tools designed to "detect, deter and prevent" tariff evasion.

Central to the effort is an AI-powered "detective border" capable of scanning shipment data against routing histories, verifying production capacity and corporate ownership structures, and even analyzing packaging patterns and port X-ray imagery to flag discrepancies between declared contents and actual cargo. Implementation would fall primarily to US Customs and Border Protection, the agency responsible for enforcing trade laws at ports of entry, which has historically relied on targeted audits and investigations rather than systematic automated screening.

For decades, US trade enforcement agencies have concentrated limited resources on high-value cases. These investigations are complex and frequently require years to assemble, allowing illicit goods to persistently enter the US market at below fair-market value, undercutting domestic commerce.

Illegal transshipment remains notoriously difficult to prove, and determining country of origin is especially complicated when products incorporate components manufactured across multiple jurisdictions. The report's reference to "substantial transformation" invokes a long-standing principle in US customs law used to determine whether goods processed in more than one country qualify for a particular country-of-origin designation. That standard, along with rules-of-origin provisions embedded in agreements such as the USMCA, has formed the backbone of origin verification for decades — though enforcement has typically been case-by-case rather than systemic.

The report does not clarify what proportion of the documented supply chain shifts reflects genuine illicit activity versus legitimate reorganization of global production.

"Effective enforcement therefore requires distinguishing legitimate manufacturing and substantial transformation from pass-through trade and origin shifting," the report concluded.

The full report, titled "The Great Transshipment Scam," is available on the White House website.

Source: Fortune | White House Report: The Great Transshipment Scam (PDF)